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Subsidies for coal to liquids compared to funding for other energy research

By Kenneth Barbalace
[Monday, June 04, 2007]
Bills in Congress to provide tens of billions of dollars in subsidies tax credits and loan guarantees for coal to liquids production (see my last blog entry) got me wondering just how much money the United States spends each year on energy research and development. Fortunately, my curiosity was easily satisfied as the International Energy Agency (IEA) tracks such things and makes their data available in an online database that allows one to query the Energy R&D budgets of participating countries. What I learned was very interesting and made the coal to liquids (CTL) proposals working their way through Congress even more disturbing.

According to the IEA, between 2001 and 2005 (the latest year data is available for) the United States spent just under eight billions dollars on energy R&D. Of the R&D expenditures, for this five year time frame, 23.46% ($1.87 billion) was spent on nuclear research (presumably, a large portion went to disposal research), 18.77% ($1.49 billion) went into coal research and 13.46% went to energy conservation in transportation (see table below). By comparison, all renewable sources combined (solar, bio-energy, wind, geothermal & hydropower) accounted for only 16.02% ($1.27 billion), with 35% of the renewable R&D going towards bio-energy (probably, corn ethanol being the chief beneficiary).

As was reported by the Motley Fool, by the coal industries own estimates the projected cost of R&D for coal to liquids production capacity capable of displacing only 10% of the U.S. crude oil needs will cost at least 200 billion dollars, for which the coal industry wants the American taxpayer to underwrite the majority of the tab.

Think about this for a moment; from 2001-2005 the U.S. spent an average of $1.59 billion on energy generation, conservation and remediation (e.g. spent nuclear fuel) R&D. Now the coal industry wants taxpayers to underwrite a significant portion of the $200 billion in R&D just for coal-to-liquids. This is how much the U.S. would be spending on energy R&D for the next 125 years if R&D budgets were to remain at 2001-2005 levels. Another way to think about $200 billion is that at $20,000 per home, this is enough money to put solar panels on 10,000,000 homes, which on average would supply 60% of those homes electric needs and help make them more self-sufficient in the event of power outages.

Does the U.S. need to spend more money on energy R&D? The answer is probably yes. Does the U.S. need to find a way to wean itself off of crude oil produced in geo-politically unstable parts of the world? The answer is most definitely yes. However, it does not make any sense for U.S. taxpayers to underwrite tens or hundreds of billions of dollars of R&D for a single source of energy. CTL is an especially dubious investment because of its high cost of production. By the coal industry's own estimates, in order for CTL to remain profitable the price of oil must remain above $50 per barrel. In addition, even with carbon capture and sequestration CTL will increase greenhouse gas emissions, which will be counterproductive towards efforts to reign in greenhouse gas emissions and global warming (see my last blog post).

Rather than putting massive amounts of taxpayer dollars into researching a single highly dubious energy source, Congress should be looking at more modest and pragmatic funding increases for wide range of energy sources. Diversifying Federal investment in energy R&D will reduce the overall risk if specific investments don't pan out and help create a diverse range of energy sources that can be tapped where they each make the most sense. Simply dumping tens of billions of dollars into a highly risky and extremely expensive source of energy, such as coal to liquids, is a sure way to a boondoggle, like we saw with the Synthetic Fuels Corporation fiasco. Is this how you want your taxpayer dollars spent?

Bar graph of data from the following table.
Pie graph of data from the following table.

U.S. Energy R&D Budgets 2001-2005 (in Millions of U.S. Dollars)
20012002200320042005TotalPercent of Total
Oil & Gas122.50110.2891.5878.0378.76481.156.05%
Hydrogen & Fuel Cells153.76171.39325.154.09%
CO2 Capture & Storage40.4645.3685.821.08%
Transportation Energy Conservation279.59264.80183.67177.14165.411070.6113.46%
Industrial Energy Conservation162.70155.05102.1192.9474.80587.607.39%
Residential & Commercial Energy Conservation142.56134.7161.5159.3965.46463.635.83%
Other Energy Conservation51.8367.3365.9061.3360.42306.813.86%
Source of data: International Energy Agency
Note: This data excludes non-energy specific research (e.g. storage technologies, energy transmission, etc.).

Further Reading
Congress proposes massive subsidies to convert coal into diesel fuel



Vanessa said...

Using Coal or not?
Coal has a lot of disadvantages. coal can only be used once, green energy generators can be used twice as long. It works day or night, not to mention energy produced and used is free of charge. It may cost more than a year's supply of coal but the rewards will be enough to save a fraction of your energy bills monthly.

Clean energy is safe energy. Even without the help of renewable energy marketing, it is obviously a wise decision to switch to green energy usage. Unlike coal that is combustible and cannot be left unattended, solar panels converts light or heat to electricity without passing through combustion.

Thank you for the information on this post!

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